

[Federal Register: August 2, 2007 (Volume 72, Number 148)]
[Notices]               
[Page 42452-42453]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02au07-139]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56151; File No. SR-ISE-2007-68]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to an Extension of the Penny Pilot Program

July 26, 2007.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 26, 2007, the International Securities Exchange, LLC (``ISE'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by the ISE. The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which rendered the proposal effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the Penny Pilot Program. The text 
of the proposed rule change is available at ISE, the Commission's 
Public Reference Room, and http://www.iseoptions.com.


II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, ISE included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On January 24, 2007, the Commission approved ISE's rule filing (SR-
ISE-2006-62),\5\ which permits thirteen option classes to quote in 
penny increments in connection with the implementation of an industry 
wide, six month penny pilot program (``Penny Pilot Program''). Under 
the Penny Pilot Program, the minimum price variation for all thirteen 
option classes, except for the Nasdaq-100 Index Tracking Stock 
(``QQQQs''), will continue to be $0.01 for all quotations in option 
series that are quoted at less than $3 per contract and $0.05 for all 
quotations in options series that are quoted at $3 per contract or 
greater. The QQQQs will continue to be quoted in $0.01 increments for 
all options series. The Penny Pilot Program is scheduled to expire on 
July 26, 2007. ISE proposes to extend the Penny Pilot Program in the 
thirteen options classes for an additional two months, until September 
27, 2007, while the Commission analyzes whether it would be appropriate 
for the options exchanges to continue the pilot, extend it, or expand 
it.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 55161 (January 24, 
2007), 72 FR 4754 (February 1, 2007) (SR-ISE-2006-62) (the ``Initial 
Filing'').
---------------------------------------------------------------------------

    As proposed in the Initial Filing, ISE represents that options 
trading in penny increments will not be eligible for split pricing, as 
permitted under ISE Rule 716. In the Initial Filing, the Exchange made 
references to the quote mitigation strategies that are currently in 
place and proposed to apply them to all option classes during to the 
Penny Pilot Program.\6\ The Exchange proposes to continue applying 
those quote mitigation strategies during the extension of the Penny 
Pilot Program. Specifically, as proposed in ISE Rule 804, ISE will 
continue to utilize a holdback timer that delays quotation updates for 
up to, but not longer than, one second. The Exchange's monitoring and 
delisting policies, as proposed in the Initial Filing, shall continue 
to apply.
---------------------------------------------------------------------------

    \6\ The Exchange confirmed that the quote mitigation strategies 
in place during the Penny Pilot Program applied to all options 
classes. Telephone conversation between Samir Patel, Assistant 
General Counsel, ISE and Jennifer Colihan, Special Counsel, Division 
of Market Regulation, Commission, on July 26, 2006.
---------------------------------------------------------------------------

    Finally, ISE will deliver a report to the Commission during the 
first month after the expiration of the pilot, which will be composed 
of data from approximately the last five months of trading, from May 1, 
2007 through September 27, 2007. The report will analyze the impact of 
penny pricing on market quality and options system capacity.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act \7\ in general, and furthers the objectives of section 
6(b)(5) of the Act \8\ in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received by the 
Exchange.

[[Page 42453]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder,\10\ because 
the foregoing proposed rule does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30-days after the date of filing.\11\ 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest.\12\ The Exchange has requested that 
the Commission waive the 5-day pre-filing requirement and the 30-day 
operative delay. The Commission believes that waiving the 5-day pre-
filing requirement and the 30-day operative delay is consistent with 
the protection of investors and the public interest because such waiver 
will ensure continuity of the Exchange's rules and will allow the Penny 
Pilot Program to remain in effect without interruption. For these 
reasons, the Commission designates the proposal to be operative upon 
filing with the Commission.\13\
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission.
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.\14\
---------------------------------------------------------------------------

    \14\ See 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-ISE-2007-68 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F. Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2007-68. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all 

written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 100 F. Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the ISE. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ISE-2007-68 and should be 
submitted on or before August 23, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-14916 Filed 8-1-07; 8:45 am]

BILLING CODE 8010-01-P
